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Arkansas Medicaid Plan May Not Change Game After All

For seven heady weeks, Arkansas — not Massachusetts, or Oregon, or California — has been at the center of the health policy world.

The state’s eye-catching proposal to expand health coverage with Medicaid dollars but using private insurance raised questions for policy wonks and lawmakers across the nation. Was the plan legal? Was expanding coverage by relying on private payers too expensive? Would other states follow suit?

After extended debate, Arkansas lawmakers this week are finally voting on the plan; as of press time on Wednesday, the state Senate was expected to approve the House-passed proposal in a narrow vote and send it to Gov. Mike Beebe (D) for his signature.

“What’s really fascinating about watching these debates unfold is that none of this was supposed to happen,” says Adrianna McIntyre, a co-author of the Project Millennial blog.

“[And] it would be entertaining if there wasn’t so much at stake.”

Arkansas Proposal, Examined

Back in late February, Arkansas Democrats faced a conundrum: While they wanted the Affordable Care Act’s Medicaid expansion, and the dollars that came with it, the plan didn’t have the backing of the state’s Republican-controlled Legislature.

(And as McIntyre reminded California Healthline, the White House was operating under its own constraints; the ACA was written with the assumption that the Medicaid expansion would be universal, but because the Supreme Court’s ruling made it optional for states, federal officials have had limited options to convince wary lawmakers to participate.)

Working with HHS Secretary Kathleen Sebelius, Beebe hammered out a deal intended to be more palatable to conservative lawmakers: Arkansas would provide private health insurance to more than 200,000 uninsured people with incomes up to 138% of the federal poverty level. That so-called “private option” would be offered through the insurance exchange that the state plans to operate in partnership with the federal government.

As David Ramsey wrote at the Arkansas Times, the proposal was a true “Medicaid game-changer”: Not only did it reinvigorate Arkansas’ debate over coverage expansion, but it also raised national questions about what the federal government was willing to do to get lagging states on board.

And in many ways, the news baffled policy watchers.

“I have no problem with this per se,” Aaron Carroll wrote at The Incidental Economist after the Arkansas proposal was announced. “I want the poor to have health care coverage. But let’s be clear, it will cost a lot more money than the Medicaid expansion would.”

That’s an especially salient point given other states’ interest in replicating the Arkansas model. (If Texas were to receive a similar deal, it would cost the federal government an additional $4.5 billion over 10 years, McIntyre and her co-author Karan Chhabra have calculated.)

But Arkansas officials have worked to stress that’s not the case.

“We don’t believe this is a costly exercise,” Andy Allison, the state’s Medicaid director, told Dylan Scott of Governing. Whether expanding coverage through the traditional Medicaid program or turning to private payers, “we’d have to increase reimbursements to ensure access,” Allison added.

Changing Terms of Participation

While Republicans in several other states — including Florida, Louisiana, Ohio, Pennsylvania, Tennessee and Texas — had expressed interest in their own version of the private option, that ardor has cooled in recent weeks because of an HHS memo that essentially set a high bar for participation, according to Matt Salo, executive director of the National Association of Medicaid Directors. As a result, only a handful of states appear likely to participate, Salo told National Journal‘s Margot Sanger-Katz.

Conservative leaders’ interest in the Arkansas plan was mostly centered on politics — and their resistance to traditional Medicaid — and not the actual policy workings of the plan, suggests Caroline Pearson, a vice president at Avalere Health.

For example, enrolling “new Medicaid eligible-beneficiaries into exchange plans enables them to access a managed care system that doesn’t currently exist in Medicaid in Arkansas,” Pearson tells California Healthline.

“By contrast, states with extensive Medicaid managed care programs today” — like Tennessee or Ohio — “will experience less incremental benefit from a premium assistance model.”

Meanwhile, “there’s been a quiet shift in what Arkansas is talking about when they toss around the phrase ‘private option,'” says Project Millennial’s McIntyre.

The state’s plan immediately stood out because the state was “planning to pursue premium assistance without a waiver under a little-used provision of the Medicaid statute.”

However, Arkansas now appears likely to pursue the expansion as a demonstration project through the 1115 waiver process.

“Without a waiver, beneficiaries would have to remain free to choose coverage under [fee-for-service] Medicaid at will,” according to McIntyre. But “with a waiver, Arkansas has more discretion to direct the newly eligible [residents] into the exchanges.”

Moving Forward

Even if the proposal passes the Arkansas Legislature and is signed into law by Beebe, it still awaits CMS review. The agency has to approve the law as it stands — or it becomes moot.

Meanwhile, other states that were eying an Arkansas-like approach may be better served simply using the tools that are already available to them, Pearson suggests.

“I think the best strategy for states that want to create a private-style benefit for new Medicaid beneficiaries is to use existing Medicaid flexibility,” she says, noting that narrowing the program’s benefits or increasing cost-sharing would help accomplish similar goals.

Weekly Roundup

What else is happening around the nation? Here’s a look.

Roofers union wants to take down Obamacare: The United Union of Roofers, Waterproofers and Allied Workers is likely the first union to initially support the law and later call for its repeal, Janet Adamy reports for the Wall Street Journal.

HHS delays small business health plan: Insurers had raised concerns that the new marketplace was going to have glitches, Alex Wayne writes at Bloomberg News.

How White House budget would affect health care: In an ungated story at Politico Pro, Jennifer Haberkorn and Brett Norman break down the president’s proposal.

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